Preview: Due August 26 - U.S. July Durable Goods Orders - Still firm, if with some slowing on prices
We expect a 0.6% increase in July durable goods orders with a 0.7% increase ex defense and a 0.8% increase ex transport. This will suggest some loss of what remains healthy underlying momentum, though the slowing probably reflects prices more than volumes.
A lot of the recent volatility in overall orders has come down to aircraft. Boeing orders slipped in July after a bounce in June, but with aircraft not having seen much of a bounce in June after seasonal adjustment they may not show much of a fall in July. We expect transport to be unchanged, as a rise in autos after a fall in June offsets a modest drop in aircraft. We expect defense, which has a large overlap with transport, also to be unchanged, remaining at an elevated level. Defense bounced in March and April and changed little in May and June, sustaining its bounce.
Ex transport data has been strong recently though June’s 0.7% increase was a slowing from four straight gains that exceeded 1.0%. Some of the slowing may have been on easing price pressures, and with core goods PPI having produced a second straight subdued month in July we expect July to also come in below 1.0%, if slightly firmer than June at 0.9%. July’s breakdown may be more balanced than in June, when almost half of the ex transport rise came from a 3.2% increase in computers and electronics. ISM manufacturing new orders suggest continued underlying strength.
We expect non-defense capital orders ex aircraft, a key indicator of business investment, to increase by 1.0%, outperforming the ex transport increase for a third straight month though less sharply than in June, when the surge in computers and electronics was probably reflected in the non-defense capital ex aircraft series.
